Company Tax

[LARRY.D]

I have recently sold my company and throughout the downturn I sustained it with personal loans from myself to bridge the gap until the sale has gone through, does anyone know if there is anyway of retaining this money?or not getting hit with a big tax bill and being out of pocket for the loans too?
The loan was not inclusive in the sale.

Any info would be greatly appreciated.

 

[CXC]

If you had paid for company expenses, then effectively the company owed this money back to you through what is called a companies directors account. The proceeds from the sale could be apportioned to reflect the amount owed to you and therefore reduce your capital gains tax exposure. Alternatively it would be possible to claim that the amount was a capital contribution by you to the company - again reducing your capital gains tax exposure - many ways to skin a cat!
Kieran Coughlan, Tax Manager, CXC

 

[PC 80]

I would suggest avoiding the capital contribution route as there is an argument that a capital contribution is not deductible for CGT purposes.

 

[CXC]

I think the Capital contribution route is quite strong - Section 552(2) of the Taxes Consolidation Act states "the amount of any expenditure wholly and exclusively incurred by the person or on the person's behalf for the purpose of purpose of enhancing the value of the asset"..... can be allowed as a deduction from the consideration. I would be of the opinion that a capital contribution would immediately enhance the value of your shares in the company - i.e. because of your capital contribution to the company, the company had more net assets, shares derive their value from the net assets of the company - de facto you capital contribution has increased the value of your shares and can be taken as a deduction in calculating the capital gains tax

 

[Joe_90]

If you made a loan to the company it would be credited to your directors current account as CXC said. On the date of sale you were still owed the money. Where did the loan go? Was it forgiven?

 

[PC 80]

I think the Capital contribution route is quite strong - Section 552(2) of the Taxes Consolidation Act states "the amount of any expenditure wholly and exclusively incurred by the person or on the person's behalf for the purpose of purpose of enhancing the value of the asset"..... can be allowed as a deduction from the consideration. I would be of the opinion that a capital contribution would immediately enhance the value of your shares in the company - i.e. because of your capital contribution to the company, the company had more net assets, shares derive their value from the net assets of the company - de facto you capital contribution has increased the value of your shares and can be taken as a deduction in calculating the capital gains tax

The expenditure also needs to be reflected in "the state and nature" of the asset which arguably it isn't - might be able get Revenue concession on this but repayment of directors loan account is better option in my view.